June 2021 – This summer, we’re spending time in office hours with some of Drew University’s amazing faculty to learn about what interests and inspires them and their research.
Today, we’re talking with Raphaele Chappe, Assistant Professor of Economics.
What about your field interests you most?
Why does it fascinate you?
Break that down for us.
The mortgage is created through a simple accounting double entry on the bank’s balance sheet: on the asset side, a new loan is booked, reflecting the fact that the borrower owes money (to the bank) on their mortgage; on the liability side, the borrower’s deposit account increases by an equal amount. The bank’s balance sheet expands, reflecting the fact that new money came into existence.
How do you bring the topic into the Drew classroom?
In my course on Money and Banking, I rely on a memo by the Bank of England that outlines how the majority of money in the modern economy is created by commercial banks. Banks substitute their own debt (deposits) for a borrower’s debt. What makes banks so unique is that their promise to pay cash—deposits—counts as money. It is part of the money supply.